EMC: Cisco's Out In The Cold, VCE Into The Fold

EMC announced this morning that its converged infrastructure joint venture with VMware and Cisco will become an EMC business, cutting Cisco's share to 10%. The VCE mission will "remain intact," according to EMC, along with the company's leadership and channel partners.

At a press conference, EMC COO Howard Elias explained that VCE was created in 2009 as a joint venture to "disrupt markets." The companies' combined technologies into the preconfigured Vblock has become a proven success, generating a $2 billion run rate with six quarters of more than 50% year-over-year growth. The company now must be able to accelerate investment and decision cycles in order to create new value and solutions for customers, Elias said. This type of agility is not possible with a cumbersome, three-company structure, so a mutual decision was made to simplify.

Rumors of Cisco's departure from VCE have been swirling around social media and the press, due to heightened conflict between Cisco and VMware. Gary Moore, Cisco's COO, insisted that his company remains committed. "The EMC-Cisco partnership remains extremely strong, and VCE will continue to be a vibrant channel for Cisco technologies going forward."

Competition between Cisco and EMC/VMware has only intensified and become more complicated in recent months as the companies wage war on the networking, cloud, and storage fronts. For its part, Cisco may be wise to keep whatever share it can in VCE, especially since the Vblock is an entry point for its UCS server platform. The company is counting on UCS as a growing revenue stream.

EMC, by contrast, has a great deal more freedom with Cisco's share of VCE reduced. The storage giant has been under pressure to sell VMware or otherwise break up its "federation" of companies, including Pivotal and RSA. Making VCE a full-fledged company could be part of a cleanup effort in preparation for a larger restructuring.

For infrastructure professionals, VCE makes more sense as a standalone company, allowing it to embark on its own partnerships and development ventures. When asked if VCE would begin including other networking technologies in its configurations, Praveen Akkiraju, CEO of VCE, sidestepped the question, saying that the company already has a "winning formula" on which it will continue to build. He did say that the focus will be on the "integration of capabilities above the stack," but that leaves a lot of room to grow.